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Hsbc In Argentina

Summary of the Case Study
Profits at the global banking group HSBC have fallen after it made provisions of more than $1.1 billion to cover losses from the economic crisis in Argentina. The Argentine crisis accounted for $1.12 billion of the write-down - which was slightly higher than analysts had forecast. The figures were in line with analysts' expectations and this helped push shares in HSBC 59p higher to close at 837p. Last year Argentina descended into chaos as people protested against draconian policies introduced to try and avoid default on overseas debt and devaluation of the peso. Eventually the pressures became too strong, and Argentina defaulted on its debts and floated the peso against the dollar. HSBC took a $520m charge to cover losses stemming from the change in value of the peso, and a general provision of $600m for losses in Argentina. Concerns about HSBC's exposure to the crisis in Argentina came to the fore yesterday as it emerged that its investment banking arm was preparing to lower its profits forecast for the company. HSBC Group's 2001 results, notably the economic crisis in Argentina and the related devaluation of the peso by the government which forced HSBC to book a US$1.12 billion charge. Argentina has been a major disappointment foe HSBC and they have a very talented team and all the necessary elements for success in a stabilised economy to have a profitable business. Nevertheless, the situation in Argentina remains both fluid and disturbing. The Argentine monetary collapse in 2001 was devastating to the economy and to a large number of Argentine citizens. Their currency was pegged to the U.S. dollar, 1-to-1, but sank to 3-to-1 after the collapse. The resulting loan default, naturally, created a firestorm in the global financial community. The fine print to all this, however, is that, in Argentina, like everywhere it seems, the rich got richer and the poor got one hell of a lot poorer. Of course, the sanctimonious world press, smelling...